Market Segmentation in B2B Markets: How TO Segment? (Part 3)

In the last two parts of the article, I describe the Fundamentals and Challenges of market segmentation in B2B market. In third installment of the article will explain the most popular methods and best practices of B2B market segmentation.

There is no one way to segment customers and prospects; it depends on as a marketer what you sell and who you are selling to. Depending on the products and brand you are marketing, one method of customer segmentation might prove more effective than another. As discussed in previous parts of the article, B2B sale is generally more complicated than B2C, with multiple people involved, a longer sales cycle and a greater emphasis on buyer/seller relationship and consultative selling.

Here are some of the most common segmentation methods for B2B marketers. Considering the Pros and Cons of each method, a statistical analysis (sales playbook and lead scoring, will discuss sometime later) will be helpful to make an informed decision about the best segmentation method (or methods) for your business.

1. Segmentation Based on Firmographics

The ‘demographic’ segmentation, usually referred to as ‘firmographic’ in business-to-business markets. Firmographic segmentation groups customers based on factors like business size (either by the number of employees or annual revenue), company location (i.e. inner-city), industry, consumption levels, transactional typology and even other technologies used by the targeted companies.

Marketers love firmographics because the cost to collect the data and use it for segmentation is fairly inexpensive. Additionally, firmographics are easily translatable to the sales team; marketers can convey the firmographic description of any particular customer segment to the sales department with little trouble.

2. Segmentation Based on Tiering

Customer tiering is a method of segmentation based on how well the customer matches the goals of your business. For instance, you can use customer tiering to segment customers based on how much revenue you can expect them to bring to your business during the duration of your relationship, or by how closely that customer matches your own sales and marketing strategies.

This is a forward-thinking approach to segmentation because it ranks the importance of a customer or lead based on how much that customer can potentially bring in terms of value. Many businesses have taken tiered segmentation to a whole new level in the last few years in the form of account-based marketing, a strategy that focuses sales and marketing activities on a limited number of accounts believed to yield the highest potential value for your business. Rather than leveraging the power of big data and marketing automation to scale campaigns across a broad range of potential leads, account-based marketing turns the sights of both the sales and marketing teams toward a common goal of maximizing the potential return from a shortlist of accounts.

Demand generation marketers also recognize the potential value of tiered customer segmentation when it comes to working with your existing customer base. While marketing efforts have historically focused on lead generation activities, savvy teams leverage big data to uncover the potential value of the customers already buying from their business. Tiered segmentation allows demand generation marketers to divide existing customers based on their customer lifetime value.

3. Segmentation Based on Buying Process

Group prospects based on their position in the buying process and influence on a purchasing decision.In this segmentation, company segmented based on Buying Unit’s or any individual’s influence in the buying decision. Sometimes, the prospects based on their yield potential for your company, either in terms of immediate profitability or growth potential (long-term or upsell opportunities).

4. Segmentation Based on Needs

Another segmentation method include, segmenting the prospects based on their business pains and unmet needs. This is a more complex type of segmentation that requires deeply understanding the prospect and being able to clearly communicate your differentiators and value to them.

Of all the methods of segmentation, this one offers the marketer the most accurate way to target customer segments. It is highly scalable because the marketer can designate as many needs-based segments as preferred. Needs-based segmentation often derives from what drives potential leads toward your business in the first place. If you are a cloud service provider and a site visitor comes to you through a blog post on file sharing, then you may determine that prospect needs a solution that simplifies file sharing. As a result, you might target that prospect with additional content surrounding that concept to help usher the user further down your sales funnel.

To choose an appropriate segmentation methods, the starting point should a good database. A well-maintained database is high on the list in any audit of marketing excellence in a business-to-business company. The database should, as a minimum, contain the obvious details of correct address and telephone number together with a purchase history. Ideally it should also contain contact names of people involved in the decision-making unit, though this does present problems of keeping it up to date.

Read the Second Part of the Article: Market Segmentation in B2B Markets: Challenges (Part 2)

Read the First Part of the Article: Market Segmentation in B2B Markets: Fundamentals (Part 1)